Four Rewarding Sectors for 2013

As we enter 2013, all eyes are on the fiscal cliff for the very short term. Assuming (as we do) that the government will eventually get its act together, it's important to scan the horizon for the likely stronger performers in the year ahead.

Overall, we are convinced that the stock market will have another year of favorable returns, despite anticipated bumps along the way. In some sectors, we expect to see follow-through from successes in 2012. In other cases, we anticipate a rebound from a lackluster year.

The big story for 2013 should be focused on company fundamentals and earnings, rather than on the broad-based macro themes that drove stocks in 2011 and through much of 2012. This focus should impact individual companies as well as sectors.

Our highest conviction is that financial stocks will continue their late-to-the-party success into 2013. Even after a strong 2012, financials are still playing catch-up from the stock market's post-2008-to-2009 recovery. Their business strength is still not adequately or fairly reflected in their stock prices. Importantly, we expect to see that business strength move higher next year, as the housing recovery becomes more pronounced, credit trends continue at attractive levels, and the economic recovery stimulates additional banking-related activities. Next year's stock prices for financials should rise to reflect their continued business success.

Within the financial sector, we believe that companies whose earnings and stocks prices have been hurt by the prolonged near-zero interest rates will rebound strongly. We do not expect a sharp increase in interest rates but think the market will anticipate, and discount, an end to the prevailing environment. Accordingly, these interest-rate-sensitive stocks are likely to begin rising well ahead of a change in the Federal Reserve's interest rate policy.

Some sectors that had poor or lackluster years should see better results in 2013. Energy, for instance, had a conspicuously poor 2012 based on macroeconomic concerns, slowing earnings growth and rock-bottom natural gas prices. Yet oil companies are still earning meaningful profits, raising their dividends and are trading at single-digit earnings multiples. We envision a snapback for energy in 2013, based on our conviction that more bellwether economies will be in growth mode, however modest.

We also project that a rebound is in store for technology stocks. Technology was something of a bifurcated sector in 2012, depending on which companies were seen as the dominant winner in various turf wars. Many of the perceived also-rans were unduly punished, and we think they'll be more favorably appraised next year. The market might take less of a "winner take all" stance and recognize tech companies with durable and highly profitable businesses that have been underappreciated and undervalued.

Similarly, industrials suffered from macro concerns disregarding relative merits and individual company strengths. As the market returns to a fundamental orientation, many industrial stocks are likely to benefit from less fearful valuations. In addition, we think some will be aided by an accelerating economy in China and a bottoming in Europe.

Financials, energy and tech stocks are our favorites for the upcoming year. While other sectors might prosper as well, we believe these three will be the primary beneficiaries of a change in market focus from macro to fundamental considerations. We also believe that they are selling at attractive valuations and are well below their historic norms.

I want to wish you all a happy, healthy and prosperous 2013. I have enjoyed being a contributor to TheStreet this past year and hope that my work and insights have been helpful. I look forward to helping TheStreet's readers navigate -- and hopefully prosper -- in the upcoming year.

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